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Former First Leaside executives get $18M penalty from OSC for fraud

TORONTO – Two former executives from the defunct real estate firm First Leaside Group must pay $18 million in penalties and restitution after Ontario’s securities regulator found they had defrauded investors by not disclosing a report critical of their business.

Founder David Phillips and salesman John Wilson have been ordered to pay back $16.6 million to investors, as well as costs and individual fines of $700,000 for Phillips and $400,000 for Wilson.

The pair are also banned from trading in securities on others’ behalf and can no longer hold positions of authority in the financial industry, such as on a board of directors or at an investment fund.

The Ontario Securities Commission said that from August to October 2011 Phillips and Wilson did not inform their customers of a report from Grant Thornton Ltd. that alleged First Leaside was using money raised from investors to prop up the financial results of other companies owned by the two.

First Leaside had a complex structure involving 161 limited partnerships and companies, the OSC said, which were connected by a web of lending and borrowing.

When the company went bankrupt, investors were left in an $18.8-million hole. The $16.6 million is meant to cover the difference between the $2.2 million in assets that remained in First Leaside and the money owed to investors.